IB SL ECONOMICS PAPER 2 ESSAY SURVIVAL GUIDE
Minna 060503

Use real world examples and they'll love you
(Une = unemployment)

Costs of une
- financial (reduced tax revenue, economy not on PPF)
- economic (much labour -> wages down)
- social (crime, social unrest)
- individual (poor health, social dislocation etc -> costs to gov)
  (+ une not evenly spread)

Measures to fight une
- Keynesian (une = vs. Monetarist (une = voluntary)
- demand-side (for cyclical une): 
  - cause: fall in AD -> fall in demand for workers
  - raise AD -> raise demand for workers
  - exp. fiscal + monetary
  - make new jobs?
- Monetarist / supply-side (structural):
  - incr. AS by reducing incentives to work
  - make the markets work!
  - remove labour market rigidities
  - lessen labour union power
- education, flexible working practices


Why different growth rates?
- define growth
- factors: natural, human, technological, institutional

Obstacles to growth:
- institutional
- international trade
- political
- international financial (debt)
- assorted others


GNP per capita when measuring living standards - why not?
- often correlates; best single indicator
- alone not good
- does not include distribution of income
- degree of accuracy varies; calculated differently; black markets
- work at home/subsistence agriculture not included
- type of output/spending? (military/consumer)

What other measures to measure development?
- Composite indicators (HDI, HSI, HPI..)
- GNP/cap + PP rates
- Other indicators:
- life exp, birth rates, pop. structure
- literacy
- access to safe water
- daily cal/protein supply, doctors/hospital beds per 100
- rural/urban migration, energy consumption
- gender equality, freedom of speech etc...

Why positive externalities may cause free markets to misallocate resources?
- free market SD diagram
- competition: profit maximisation + self-interest
- equil. quantity to the allocation of resources
- consumer sovereignty
- impact of & examples of positive externalities
 -> social benefits 
- benefit should be included on equil. quantity -> new allocation of resources

What options do the government have when they want more positive externalities?
- use of maximum prices
- legislation (wear seat belts, damn it!)
- provision of goods/services free (education, health)
- mixture of "free" + market provision
- subsidies
- advertising campaigns
- tax subsidies
- difficulties: problems in measuring social optimality; cultural perspectives etc